MutualFundWire.com: 3 Things to Know From Calamos' Q3 2013 Earnings

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Thursday, October 24, 2013

3 Things to Know From Calamos' Q3 2013 Earnings

Despite dips in both revenue and earnings, Calamos Asset Management (CLMS) [profile] still beat expectations.

Yesterday the Naperville, Illinois-based mutual fund shop reported third-quarter earnings per share of $0.20 and revenue of $65.0 million, down from $0.22 and $66.7 million, respectively, in Q2 2013. Yet that $0.20 per share was still more than 50 percent higher than the analysts' average forecast of $0.13, as reported by Nasdaq and RTT News.

On an earnings call yesterday afternoon with analysts, Calamos namesake chairman, CEO and global co-chief investment officer John P. Calamos, Sr. revealed that 50 percent of the shop's assets are currently in open-end mutual funds, with the rest divided amongst closed-end funds, managed accounts and institutional strategies [Seeking Alpha's transcript of the call]. The discussion on the call did not include any mention of freshly departed president and chief operating officer James Boyne

Here are three key takeaways from Calamos' earnings and from the analyst call, which also included Calamos fund administration chief and chief financial officer Nimish Bhatt:

Point 1: Calamos' Outflows Are Slowing Down.

Point 2: At Calamos Alts, Not Traditional Equities, Are Raking In the Dough.

Point 3: The Calamos Investment Team Expansion Isn't Over Just Yet.

Now to delve deeper into each of those points:

Point 1: Calamos' Outflows Are Slowing Down.

The chief himself had this to say about their net flows:

... [W]e breakdown the some of the important developments for the quarter. Total assets increased from $20.6 billion to $27.5 billion, driven by market appreciation, offset by slower outflows. We experienced net outflows of $980 million for the quarter versus $2.3 billion last quarter. Flows are moving in the right direction and we are encouraged by this positive trend ...

The company’s funds experienced net outflows of $612 million, compared to $1.3 billion from the second quarter, while separate accounts had $368 million in net outflows for the quarter, compared to $981 million from the second quarter ...

Overall, the rate of outflows for the quarter has slowed significantly from the previous quarter. Again, we are very pleased to see the positive trends as we focus our attention on investment performance.

Point 2: At Calamos Alts, Not Traditional Equities, Are Raking In the Dough.

The drop in the outflows, Calamos revealed, is thanks in large part to their alternative investment products, not their traditional stock funds. Calamos explained:

We also saw positive flows of $264 million into our alternative strategies. We view these strategies as contributors to our growth going forward, as investors look to alternatives to invest in instead of bonds ...

Our total assets increased by 3% during the quarter, driven by $1.8 billion in market appreciation, primarily from equity and lower-volatility equity strategies ... The net outflows stem primarily from our U.S. growth strategy, lower-volatility equity strategies, while net inflows were seen in our alternative strategies this quarter.

Point 3: The Calamos Investment Team Expansion Isn't Over Just Yet.

This summer Calamos added high yield PMs Jeremy Hughes and Chris Langs, and he hinted that more PM hiring is on the way:

This quarter, we enhanced our existing Investment Team resources, including two additional co-portfolio managers for fixed income and high yield.

Later, in the Q&A section of the call, Calamos delved further into his PM hiring plans:

Adam Q. Beatty – Bank of America Merrill Lynch
... In terms of the different personnel changes in the quarter, you had a couple of additions, maybe a couple of subtractions. Just trying to get a sense around the run rate on that, you mentioned completing the build-out of your Investment Team, so it sounds like maybe there’s a little bit more to come. What was the timing of the rolling on of the new senior folks in the quarter and also how much more would you look to add there?

John P. Calamos, Sr.
We’re continuing to look, but it’s – right now, it’s more around the edges. We’ve made some significant contribution this past year, but we will continue to look at the building out the Investment Team going forward, but it’s more so around the edges.

To dig deeper into Calamos' Q3 and beyond, read the earnings release and Seeking Alpha's transcript of the earnings call.

Printed from: MFWire.com/story.asp?s=46537

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